Wafer fab equipment spending set a fresh record in 2017, reaching US$44.5 billion globally. Given the favorable market conditions and rosy outlooks, especially for the memory market, worldwide investment growth is expected to continue into 2018. While historical fab investment patterns tend to fluctuate every few years, the capital equipment market is betting on its next mega-driver to continue the momentum into 2019 and beyond. China may be the answer.

China’s ambitious plan to build considerable capacity for semiconductor device fabrication is not news to the industry. According to SEMI’s World Fab Forecast, China is set to build 19 new semiconductor fabs from 2017 onwards, and 10 out of 19 projects are planned for 300mm wafer facilities. In the meantime, China’s fab construction spending will log record highs in 2017 and 2018, reaching $6.2 billion and $6.8 billion respectively, to account for over 50 percent of worldwide construction spending. Upon completion, some of those projects will enter the next phase of equipment procurement, with installations starting no sooner than 2018.

China’s front-end fabs are forecast to spend $12 billion this year and, with support from a few major memory and foundry projects, the country’s spending may exceed $20 billion in both 2019 and 2020. The changing composition of these huge investments is particularly noteworthy. Overseas multinationals such as Samsung, SK Hynix, Intel and GLOBALFOUNDRIES are forecast to spend more than China companies throughout the forecast period; however, in the latter half of the forecast, spending by China companies will catch up.

The figure above illustrates the projected top spenders in China from 2016 to 2020. SMIC will lead the pack in fab equipment investment with its new 300mm fab projects in Beijing, Shanghai, and Shenzhen as well as 200mm investment in Tianjin. However, the number two to number five positions are all occupied by multinationals, especially from the memory segment. Samsung will continue its phase two investment in Xian; Intel is ramping up its 3D NAND capacity in Dalian; and SK Hynix is building a new DRAM fab in Wuxi. New memory players in China will only start to increase spending in the latter half of the forecast period. Aggressive investment is also planned by leading foundries in China including GLOBALFFOUNDRIES’ Chengdu fab, Hua Li Micro’s Fab 2 in Shanghai, UMC’s Xiamen fab, and TSMC’s Nanjing fab. Compared to a year ago, the investment levels and schedules of multinational companies’ in China have become more aggressive.

China’s investments in foundry and memory segments are clearly paving the way for its place on the global semiconductor stage, with the current outlook showing China rising in prominence as a key region from 2018 onwards for new fab investments. Companies in the global supply chain will seize the growing investment opportunity in China by collaborating with both multinational companies and China device makers.